-- China won't be hard hit if the U.S. initiates a fresh round of quantitative easing, he says

SHANGHAI -- China may cut the reserve requirement ratio for banks three to four times by the end of this year, and policymakers will likely be prudent in adjusting interest rates, a fund manager with Harvest Fund Management Co. said.

"China's monetary policy will likely be looser slightly than last year" to cope with the slowing domestic economy, Yang Yu said in a recent email interview.

He added that China's economic growth is likely to slow further in the next one or two quarters, although the magnitude of deceleration could be limited if the global economy improves.

China's economy has gradually geared down over the past few quarters, with growth slowing to 8.9% in the fourth quarter of 2011 from 9.1% in the third quarter and 9.5% in the second quarter.

China cut the reserve requirement ratio for banks two times since late 2011 when it lowered the ratio for the first time in nearly three years, marking a shift in its emphasis toward supporting growth and away from combating inflation. However, benchmark interest rates have been unchanged since July 7, 2011 when the latest hike took effect.

Yang also said China is unlikely to be hard hit if the U.S. initiates a fresh round of quantitative easing, or QE3.

"The employment situation in the U.S. is likely to remain healthy, which reduces the possibility of QE3, but we still expect the Federal Reserve to launch QE3 although the magnitude (of stimulus) would be moderate and the Fed may hold off launching it until the end of second quarter or the second half," said Yang.

"A modest easing in the U.S. is unlikely to bring strong inflation pressures to China, indicating the policy space for China won't be narrowed significantly," he explained.

Harvest is among the top five fund managers in China in terms of assets under management.

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